Nikko Asset Management is set to roll out two new ETFs this week which will become the lowest-cost ETFs in Japan to track the Nasdaq 100.
The ETFs are set to be at least 20 basis points cheaper than existing Nasdaq 100 ETFs currently available in Japan.
The Listed Index Fund US Equity NASDAQ 100 No Currency Hedge (2568 JP) and Listed Index Fund US Equity NASDAQ 100 Currency Hedge (2569 JP) will track the US large-cap, tech-leaning index with the latter fund also offering currency hedging between the US dollar and yen.
Both ETFs are expected to list on Tokyo Stock Exchange on 24 September with expense ratios of 0.25%.
In contrast, the next-cheapest Nasdaq 100 ETF in Japan – the Next Funds NASDAQ 100 R ETF (1545 JP), offered by Nomura Asset Management – comes with an expense ratio of 0.45%. This fund houses ¥27 billion (approximately $250 million) in assets under management.
Tech-driven outperformance
The Nasdaq 100 consists of 100 of the largest US and international non-financial companies listed on Nasdaq Exchange and is widely seen as a barometer of the health of the US large-cap TMT sector.
Information technology stocks account for nearly half (48.2%) of the index’s total exposure and include tech titans Apple (12.0%) and Microsoft (11.7%). The communication services sector makes up another 19.7% and includes Alphabet (7.3%), Facebook (4.2%), and Netflix (1.9%). The third-largest sector exposure is consumer discretionary (17.1%) primarily due to the influence of e-commerce and cloud computing giant Amazon (10.5%).
The Nasdaq 100 has outperformed other major US equity benchmarks so far this year due to its tilt towards mega-cap tech companies which have benefitted from the ‘stay-at-home’ Covid-19 environment. Despite the tech sector pulling back in recent weeks, the Nasdaq 100 is still up 26.2% year-to-date (18 September) compared to a 5.2% gain and 0.8% loss for the S&P 500 and Dow Jones Industrial Average respectively.
Growing Asian footprint
Tokyo-headquartered Nikko has taken several steps recently to expand its ETF business in Asia. In March, it launched Japan’s cheapest ETF to track the Dow Jones Industrial Average at an expense ratio of just 0.30%, while earlier this month, the firm unveiled Japan’s first ETF to provide responsibly focused exposure to the country’s real estate investment trust (REIT) market.
Nikko is also seeking growth in other Asian markets. In October 2019, the firm debuted in Hong Kong with the launch of a global internet ETF and has followed up with a new listing in June that provides actively managed thematic equity exposure to the video gaming and eSports industries.